Political Instability Woes Drag Egypt’s Benchmark 7% Lower In Week

In a week that witnessed mostly red performance, Egypt bourse has lost  EGP 18.9 billion driven by growing political instability amid the courts’ rulings which dissolved the country’s upper house and convicted 43 foreign NGO employees alongside the Ethiopian dam threats gaffe issued during a national meeting held by President Mohamed Morsi.

The capital market reached EGP 342.471 billion on Thursday, compared to EGP 361.435 billion a week earlier.

Egyptian Exchange’s benchmark EGX 30 index sank by 6.9% this week, representing a decline of 377.75 points, ending Thursday’s transactions at 5061.02  points compared to 5438.77  points at the end of last week.

Main index hit its highest point on Sunday closing at 5374.96 points, where its lowest point recorded on Thursday at 5061.02  points.

Meanwhile, the mid- and small-cap index, the EGX70 pushed down by 7.27% closing at 408  points during Thursday’s session, compared to 440 points at the end of a week earlier. The price index, EGX100 also fell by 5.53% concluding by 700 points during Thursday’s session, compared to 741 points at the end of a week earlier.

Companies’ Weekly Performance:

Orascom Telecom Holding – (ORTE.CA) closed last week at EGP 4.98, while closed on Thursday at EGP 4.35, sinking by EGP 0.63 (13%).

Stock highest close during the week came on Sunday at EGP 4.7, while the lowest came on Wednesday closing at EGP 4.31.

It is worth noting that, Baskindale submitted a request to Egyptian Financial Supervisory Authority (EFSA) to execute the offer to acquire 16 % of Orascom Telecom shares; which is below the minimum limit of 26.16 % set in the tender offer.

On Sunday, Russian firm Altimo said it had no plans to launch a new offer to buy out minority shareholders in Orascom Telecom (after Egypt’s regulator rejected its attempt to reopen its earlier tender, Reuters reported.

“EFSA didn’t give us the waiver to reopen tender and permitted only withdrawals so we couldn’t proceed with the offer though we were willing to,” Altimo’s vice president Evgeny Dumalkin said.

“At the moment there are no plans to launch a new offer,” he said.

On Monday, OT announced that the company is conducting talks over terms and conditions of license renewal for its unit in Zimbabwe Telecel.

OT added, in a release responding to EGX inquiries, that Telecel Zimbabwe is not part of company’s consolidated financial results adding that it represents a very tiny percentage in group’s total revenues.

It is worth noting that, Zimbabwe will not renew the license of a unit of Orascom Telecom until it turns over a majority of its shares to local shareholders, Reuters reported on Friday according to state media.

Orascom owns 60 percent of Zimbabwe’s second-largest mobile company, Telecel, which Transport, Communications and Infrastructure Development Minister Nicholas Goche said was in breach of its license requirements, the state-owned Herald newspaper reported.

The 15-year license issued to Telecel, which has 2.6 million subscribers, expires next month.

Goche said Telecel should meet its license requirements stipulating that Orascom hold 40 percent, with the majority to be owned by black Zimbabweans, the Herald reported.

“If they don’t do that I will not renew their license. They should meet the conditions they were asked to meet,” the newspaper quoted Goche as saying.

Orascom Construction Industries – (OCIC.CA) closed last week at EGP 233.16, while closed on Thursday at EGP 232.65, dipping by EGP 0.51.

Stock highest close during the week came on Tuesday at EGP 234.64, while the lowest came on Monday at EGP 230.48.

On Monday, OCI N.V.’s subsidiary, OCI, announced it is convening an Ordinary General Meeting (OGM) and an Extraordinary General Meeting (EGM), as per the request of the Egyptian Financial Supervisory Authority (EFSA), to allow its shareholders to vote on various resolutions pertaining to the Share Exchange Offer for its shares announced by OCI N.V.

Also on Monday, OCI N.V. announced that it has formally submitted updated documents to FSA to launch a tender offer on all of OCI shares on the Egyptian Stock Exchange (EGX).

OCI N.V. will offer all shareholders of OCI S.A.E. an Exchange Offer to convert in to OCI N.V. as well as a cash alternative of EGP 255 per share.

On Tuesday, Egyptian Financial Supervisory Authority (FSA) announced that OCI N.V. submitted documents of mandatory tender offer to buy OCI all shares at EGP 255 per share.

FSA added, in a release sent to EGX that, it is discussing the new offer.

On the other hand, OCI announced that it received a notification from OCI N.V. considering the new offer.

On Wednesday, OCI N.V. said it plans to sell a minority state in a methanol and ammonia plant in Texas in an initial public offering in the second half of 2013, Reuters reported.

The new partnership will use the funds from the IPO to repay debts and finance a debottlenecking project at the plant in Beaumont, Texas.

OCI has set up a limited partnership that will apply this month to the U.S. Securities and Exchange Commission to carry out the IPO.

“Subject to market conditions and final approval by OCI N.V.’s board of directors, OCI N.V. anticipates that a minority interest in the MLP will be offered in the IPO in the second half of 2013,” OCI said in a statement to the press.

Investors’ Activity:

Local investors led the market activity all through the week, followed by Foreign and Arab investors respectively.

Foreign investors were the most active buyers this week earning the value of EGP 65,197,062.

Arab investors chose also to buy by value of EGP 4,890,161.

Local investors were most active sellers this week by the value of EGP 70,087,225.

Political Deterioration:

Global Outrage Over NGO Court Rule In Egypt

Criticism against the sentencing of two German foundation workers in Egypt is crossing party lines in Germany. Experts also see a political signal in the Egyptian judge’s decision.

German Chancellor Angela Merkel acknowledged the judgment “with great dismay,” a spokesperson said in Berlin on Wednesday (05.06.2013). The decision is a puts a strain on German-Egyptian relations, the statement continued. Workers at several other international non-governmental organizations (NGOs) were similarly sentenced.

German Foreign Minister Guido Westerwelle also said he was upset and very concerned about the harsh punishments the court handed down to the German foundation’s employees. In a statement he said the court weakened the rule of law in Egypt and added that his ministry would work with the Konrad Adenauer Foundation to get the sentence lifted.

“The United States is deeply concerned by the guilty verdicts and sentences, including the suspended sentences, handed down by an Egyptian court today against 43 NGO representatives in what was a politically-motivated trial,” U.S. Secretary of State John Kerry said a written statement.

“This decision runs contrary to the universal principle of freedom of association and is incompatible with the transition to democracy.”

Meanwhile, Virginia Rep. Frank Wolf (R-VA) spoke on Tuesday on the floor of the House of Representatives condemning an Egyptian court for sentencing 43 NGO workers, including Americans, to jail.  He also called for cutting off U.S. aid to the Muslim Brotherhood-led government in Cairo should the court decision stand.

“This was a sham trial from the start.  If this decision stands, not a penny more of U.S. taxpayer money should go to the Muslim-Brotherhood led government in Cairo.

The White House said the court’s decision “undermines the protection of universal human rights,” and several senators suggested they would review Egypt’s standing.

On-Air Ethiopia Dam Talk Scandal

The talks, chaired by president Morsi, revolved around a report of a tripartite Egypt-Sudan-Ethiopia commission on Ethiopia’s decision to divert the Blue Nile for a massive dam project, sparking fears of a major impact on downstream states Egypt and Sudan.

Seated around a large table, the politicians thinking this was a closed meeting began to suggest ideas for ways to stop the dam project.

Ayman Nour, head of the liberal Ghad Party, suggested spreading rumors that Egypt was buying military planes in order to put “pressure” on Ethiopia, he said.

He also suggested Cairo send political, intelligence and military teams to Addis Ababa because “we need to intervene in their domestic affairs.”

Yunis Makhyun, who heads the conservative Islamist Nur Party, said the dam constituted a “strategic danger for Egypt”, requiring Cairo to support Ethiopian rebels “which would put pressure on the Ethiopian government.”

The meeting, a huge embarrassment both for the presidency and the opposition members who attended, caused a storm of ridicule and anger in the media.

“A scandal in front of the world,” read the headline of the independent daily Al-Tahrir.

Popular talk show host Reem Magued, who aired parts of the meeting on her show, said: “It’s true that we asked for transparency from the government but not like this, not to the point of scandal.”

Ethiopia has begun diverting the Blue Nile 500 meters (yards) from its natural course to construct a $4.2 billion (3.2 billion euro) hydroelectric project known as Grand Renaissance Dam.

The first phase of construction is expected to be complete in three years, with a capacity of 700 megawatts. Once complete the dam will have a capacity of 6,000 megawatts.